March 7, 2010

Understanding Medicare (Part II)

Medicare is a Federal health insurance program that pays for hospital and medical care for elderly and certain disabled Americans.

The program consists of two main parts for hospital and medical insurance (Part A and Part B) and two additional parts that provide flexibility and prescription drugs (Part C and Part D).

Medicare Part A, or Hospital Insurance (HI), helps pay for hospital stays, which includes meals, supplies, testing, and a semi-private room. This part also pays for home health care such as physical, occupational, and speech therapy that is provided on a part-time basis and deemed medically necessary. Care in a skilled nursing facility as well as certain medical equipment for the aged and disabled such as walkers and wheelchairs are also covered by Part A. Part A is generally available without having to pay a monthly premium since payroll taxes are used to cover these costs.

Medicare Part B is also called Supplementary Medical Insurance (SMI). It helps pay for medically necessary physician visits, outpatient hospital visits, home health care costs, and other services for the aged and disabled. For example, Part B covers:

Part B requires a monthly premium ($96.40 per month in 2010, the same as 2009, except for those in a higher income level, which will require a payment of $110.50 ), and patients must meet an annual deductible ($135.00 in 2009) before coverage actually begins. Enrollment in Part B is voluntary.

Medicare Advantage Plans (sometimes known as Medicare Part C, or Medicare + Choice) allow users to design a custom plan that can be more closely aligned with their medical needs. These plans enlist private insurance companies to provide some of the coverage, but details vary based on the program and eligibility of the patient. Some Advantage Plans team up with health maintenance organizations (HMOs) or preferred provider organizations (PPOs) to provide preventive health care or specialist services. Others focus on patients with special needs such as diabetes.

In 2006, Medicare expanded to include a prescription drug plan known asMedicare Part D. Part D is administered by one of several private insurance companies, each offering a plan with different costs and lists of drugs that are covered. Participation in Part D requires payment of a premium and a deductible. Pricing is designed so that 75% of prescription drug costs are covered by Medicare if you spend between $250 and $2,250 in a year. The next $2,850 spent on drugs is not covered, but then Medicare covers 95% of what is spent past $3,600.

What about services that are not provided through Medicare?

Supplemental coveragefor medical expenses and services that are not covered by Medicare are offered throughMediGapplans. MediGap consists of 12 plans that the Centers for Medicare and Medicaid Services have authorized private companies to sell and administer. Since the availability of Medicare Part D, MediGap plans are no longer able to include drug coverage.

Who is eligible for Medicare?

To be eligible for Medicare, an individual must either be at least 65 years old, under 65 and disabled, or any age with End-Stage Renal Disease (permanent kidney failure that requires dialysis or a transplant.)

In addition, eligibility for Medicare requires that an individual is a U.S. citizen or permanent legal resident for 5 continuous years and is eligible for Social Security benefits with at least ten years of payments contributed into the system.

Who pays for services provided by Medicare?

Payroll taxes collected through FICA (Federal Insurance Contributions Act) and the Self-Employment Contributions Act are a primary component of Medicare funding. The tax is 2.9% of wages, usually half paid by the employee and half paid by the employer. Moneys are set aside in a trust fund that the government uses to reimburse doctors, hospitals, and private insurance companies. Additional funding for Medicare services comes from premiums, deductibles, coinsurance, and co-pays.

Medicare Supplement plansare offered through private insurance companies to fill the "medi-gap" of expenses not covered by medicare. (Explained in Part III). For a freeMedicare Supplement quote, visit the Quotebroker Health Insurancewebsite